International Integration for Regional Public Management (ICPM 2014)

e-Procurement Practices in Four Areas in East , : Accountability, Efficiency and Barriers

Rachmat Hidayat University of Jember / Charles Darwin University ([email protected])

Abstract Electronic Procurement (electronic auctions) aims to cut thechain ofbureaucracyandmake public sectorspendingmoreeffectiveandefficient. Thisarticlediscusses theimplementation process of E-Procurement in four regenciesineastern Java: , , and Jember with emphasis ontheaccountability and efficiency issues.The findings show that in 2011there were24,475auction pack ages using the mainframe of e-Procapplication with a value of more than 38 trillion Rupiah, of which4.4 trillion Rupiah of state money could be saved by the application of e-Proc mainframe. There are two main aspectst of the process of implementing e-Proc that hampered e-Procacceleration and raised the potential for corruption in the process of implementing e-Proc: the user (end user of e-Proc) and the mediator (Procurement Services Unit-ULP of eachgovernment institution). These two elements play a crucial part in determining the process of E-Proc which subscribe to the notion of accountability, efficiency, transparency and fairness. Finally, this paper provides some recommendations to improve the current practice of e-Proc in Indonesia; first, creating indicators/criteriaTransparency and accountability in the internal e-Proc implementator; Second, Injecting the value and the importance of leadership and personal integrity; Third, he need to reformulate a new system of E-Gov that compatible or supporting e-Proc; Four, Increasing the role of government monitoring unit.

Keywor : Electronic Procurement, , Accountabiliy

1. Introduction service sector. Although offering several positive Electronic Government (E-Gov) is not a new developments, the application of electronic concept in the governance sphere. Nowadays, procurement in Malaysia shown that issues such as almost all regencies in Indonesia have applied E- accountability, transparency, corruption, integrity Gov. It is not only a medium for development and and cronyism still exist in the electronic information, but E-Gov also acts as a means to procurement system in Malaysia (Hui, Othman, communicate with the community. Similar to the Omar, Rahman, & Haron, 2011). Data published in usage of the internet by the private sector, E-Gov 2011 by the Indonesian Government Goods and brings a change in the process of goods and Services Procurement Organization (Lembaga services. By the use of E-Procurement (e-Proc), Kebijakan Pengadaan Barang dan Jasa goods and public service can be delivered more Pemerintah/LKPP) states that at present there are effectively and efficiently, as well as reducing thirty four (34) regencies in thirty three provinces government spending. The use of e-Proc in public in Indonesia which used e–Proc in government service shows transparency, which is relevant with goods and service bidding. These studies will the objective of the Indonesian government. discuss several factors of e-Proc that act in Indeed, President Policy (PP) 80/2003 in its fourth supporting and accelerating roles. Furthermore, the change to PP 8/2006 did not regulate and organize process of implementation of e-Proc in four the application of e-Proc, yet at the present time regencies of East Java (Sampang, Kediri, Surabaya local government makes use of it in the public and Jember) will be discussed.

© 2014. The authors - Published by Atlantis Press 14

Figure 1. The Process of and Mechanism of Electronic Procurement in Indonesia

2. e-Procurement Practice in Indonesia report, Indonesia’s position moves up 12 levels, The figure above shows the electronic bidding from 109 in 2010 to 93 in 2011. Indonesia is also mechanism in Indonesia. The process is preceded included in the list of nations with best with the demand of the users in each Ministry, performance, together with 30 other countries. This organization and local government was achieved because during these several years, (province//city) to each Procurement there was much optimal effort done by the Service Unit (Unit Layanan Pengadaan/ULP). The Indonesian government in utilizing the Electronic ULP then will input the data related with the Government in the public service. The release of good/service procurement to the Electronic President Instruction No. 17/2011 obligated all Bidding System (Sistem Pengadaan Lelang Secara Indonesian government institutions to use e-Proc, Elektronik/SPSE) which is integrated with the with a clear objective. The central government Electronic Bidding Institution (Lembaga offices should use 75% of the allocated budget, Pelelangan Secara Elektronik/LPSE) in each while the local government offices only requires to Ministry, organization and local government use 40% from its budget to be spend thorough the (province/regency/city). LPSE as the regulator of e-Procurement. This is such an important the electronic bidding will be the IT based breakthrough because in President Policy electronic interaction area between ULP and each No.54/2010 the minimum target on the vendor/provider. The electronic bidding process is application of e-Procv is not explicitly arranged. In organized by the President Policy No 70 of 2012 East Java, there is a significant improvement on which arrange the second change of President electronic bidding value, Deputy of Good/Service policy No 54 of 2010 about good/service Procurement Policy and Strategy Development procurement. e-proc transparency and Sector, Himawan Adinegoro in a seminar on accountability in four local governments of East Government Good/Service Procurement Electronic Java. System (Semiloka Sistem Elektronika Pengadaan E-Gov development in Indonesia has reached a Barang/Jasa Pemerintah) in Surabaya (Jawa Pos, significant advance, as shown in the report E- September 28th, 2012). He states that the value of Government Survey 2012 released by UN. In this

15 E-Proc in East Java is 1.3 trillion rupiahs in Proc in central government. Kediri also shows an September 2012. excellent trend in LPSE application which is done Table 1. The value of Online Government by LPSE of the regency, even though there was a Good/Service Procurement in East Java transition from manual style bidding before. As No Year Total Value one of the institutions with much experience in 1 2010 Rp 700.000.000.000 doing electronic bidding, Surabaya seems to 2 2011 Rp 1.300.000.000.000 implement the E-Proc application optimally. The 3 2012 Rp 1.300.000.000.000 deputy of ULP of Surabaya, Mr. Tri Broto, states that what is important is ‘the political will’ in Himawan further states that the E-Proc implementing electronicbidding through LPSE implementation in East Java can be considered one Surabaya, so that it can be done well without of the best in Indonesia, though among 38 cities intervention. While The recorded data on the LPSE and regencies in East Java there is one region website of Jember until October 2012 show a (Bangkalan) which has not performed online significant difference between expenses done bidding. This study focuses on the package electronically and non-electronically. The data volume and the bidding value which is offered by show that Jember has done less electronic bidding, Sampang, Kediri, Surabaya and Jember through but with a quite significant value. the LPSE website in each regency Table2. The Amount Of e-Procurement 3. e-Proc and Local Government Budget Package compare to the regular procurement Government Good/Service Procurement Policy package Organization (LKPP) is a regulator and provider of Regency Year e-Proc Non e-Proc mainframe websites for all Indonesian Government Bidding Package Institutions. Its position as a regulator can Package guarantee the E-Proc principles: efficient, Sampang 2012 108 262 effective, transparent, competitive, indiscriminate, 2013 367 1 open and accountable. Data made by LKPP show Kediri 2012 123 13 that there are 315 LPSE in 32 provinces and 613 institutions in Indonesia. In 2012 there are about 2013 220 0 24,475 bidding packages with the value more than Jember 2012 73 120 38 trillion rupiahs which use the E-Proc 2013 294 1 application. From these data, LKPP reportedly Surabaya 2012 393 0 saved 4.4 trillion rupiahs worth of national 2013 908 0 financial efficiency. This efficiency comes from

the cutting of transportation, accommodation, The table vividly describesThe recorded data on consolidation, and printing expenses. LKPP also the LPSE website of Sampang until October 2012 acknowledges that there are 125 good/service shows that there is a balanced portion of local vendors listed and verified officially in the SPSE expense through LPSE website. This is relevant system. This is consistent with the writer’s finding with the President Instruction No. 17/2011 which in Pemkot Surabaya which confirms the positive obliges all national institutions to implement E-

16 performance of E-Proc implementation in cutting institution. In the user aspect, the identified the government budget. The following data show challenges will be: the efficiency of the Surabaya budget after using 1. The effort of Satuan Kerja Perangkat Daerah the electronic bidding system. /SKPD (Local Government Unit/institution) to bring out their stuff from ULP Table3. E-Proc Implementation and Efficiency 2. The package proposal from SKPD to ULP in The City Surabaya which is out of schedule Year Budget Efficiency Percentage 3. When SKPD offers a technical specification, (in (in billion) asking for a certain brand billion) 4. The absence of SKPD in the meetings 2008 340 80 23.68% 5. The cancellation of a package due to 2009 1,200 384 29.97% insufficient planning 2010 1,300 464 35.19% 6. SKPD disqualifies the winner with an 2011 988 257 34.07% inappropriate reason. 2012 1,340 207 34.32% These challenges can cause the following 2013* 5,068 1,392 26.93% problems: *up to October 1. The occurrence of corruption between SKPD Based on the data above, Surabaya achieved a with the vendor/partner budget saving after implementing E-Proc of up 2. The occurrence of corruption between ULP and until 1.392 zillion rupiahs since 2008 until SKPD, which can be taken advantage of by September 2012, or saved the budget of 26.96% vendor, politicians, and the related parties from the total 5.068 zillion rupiahs. While in a In the mediator aspect, the challenges can be: recent budget until September 2012 Surabaya can 1. Misleading information between ULP and save 207 billion rupiahs, or about 19.32% of the LPSE due to the presence of ULP personnel total budget of 1.340 zillion rupiahs. This shows in LPSE website that the implementation of E-Proc has a positive 2. The performance of LPSE which is not influence on the saving of State funds. maximum, since not all output has been done automatically 4. The Challenges of e-Proc Implementation in 3. IT based management information system is Four Regencies in East Java not yet integrated in almost all local This study has successfully identified several governments, except in Surabaya. challenges in East Java. There are two main Those challenges will in return trigger the aspects that could be an obstacle in the acceleration occurrence of the following deviations: of E-pros and could raise the potential of 1. In-effective and in-efficient system corruption in the E-Proc implementing process. performance They are the user factor, in this case the user of 2. A lengthy process of decision making goods/services; and the mediator aspect, that is the ULP in each related ministry, organization and

17

Figure 2. The challenges in the implementation of e-Proc in the four regions in east java

In brief, the figure above described the main problem Jember) has advanced in several ways, though there identified by this study is that E-Proc implementation are also some challenges. These are: in Indonesia has not been able to maximize the role 1. The unclear indicator of transparency and of ULP as the mediator in the E-Proc process. The accountability in the procurement process fact that ULP is part of the local government is one of 2. The low level of political commitment of the local the aspects that may endanger the transparency and government. accountability of E-Proc. This study shows that it is 3. The absence of the E-Gov system which is necessary to make a strict differentiation between the compatible with the central e-Proc mainframe mediator and user in the E-Proc process. If they are 4. The weak internal monitoring by the central and put together, there will be potential of deviation, local governments, which can be a crucial aspect administratively or politically. in the implementation of transparent and accountable E-Proc. 5. Conclusion and Recommendation Several recommendations on fostering the process E-Proc is important in all aspects of government so and the implementation of e-pros that endorse the that the bidding process will be more efficient, principles of accountability and efficiency in effective and transparent. It will reduce expenses, Indonesia : corruption and mis-allocation of public sources in the 1. CreatingIndicators/CriteriaTransparencyandaccou era of decentralization in Indonesia. This study shows ntabilityin the internal e-Proc implementator: how the implementation of e-Proc in four regencies a. Not mentioning any specific brands or the in East Java (Sampang, Kediri, Surabaya, and specification of goods/services to beauctioned

18 b. Submission of Procurement based on a Malaysia. International Journal of Public Sector predetermined rotation auction date Management, 24(6), 567-593. c. Periodic Rotation ULP members to reduce the (3) Indrajit, RichardusEko. (2003). Electronic potential for fraud Government: Strategi Pembangunan dan d. The strict dichotomy between the committee Pengembangan Sistem Pelayanan Publik Berbasis of ULP Tehnologi Digital. : Andi 2. The Importance of Leadership and personal (4) Electronic Procurement Service/ integrity LPSE. (2012).Bidding data (Data file) retrieved a. The enactment of internal integrity pact from http://lpse. jemberkab.go.id/eproc/app. b. The enactment of a sustainable performance Accessed on October 6th, 2012 monitoring unit in Local government (ULP- (5) ______Jawa Pos 28 September 2012: Naiknya LPSE). angka lelang eletronik di Jawa Timur c. The need of political endorsement from the (6) Electronic Procurement Service/ local political stakeholder. . LPSE (2012).Bidding data (Data file) retrieved 3. The need to reformulated a new system of E-Gov from : http://lpse. thatcompatible or supporting e-Proc: E-City Kedirikab.go.id/eproc/app/service=page/home. Planning .E-Budgeting, E-Project Plannin, E- accessed on October 9th, 2012 Procurement, E-Sourcing. E-Delivery,E- (7) Hidayat, R & Suji. (2012). Laporan Penelitian Controlling,E-Performance,E-Asset Strategis Nasional: Akselerasi Daya Dukung E- 4. Increasing the role of government monitoring Procurement dan Model Penumbuhan Iklim unit (Inspectorate) Usaha Daerah berbasis E-Gov. a. Revitalizing the institutional monitoring of the (8) Electronic Procurement implementation of the E-Proc Service/ LPSE (2012). Bidding data (Data file) b. Revitalizing the institutional monitoring on retrieved from http://lpse. Sampangkab.go.id. on the Standard Operating Procedure of e-Proc October 8th, 2012 c. Revitalizationon the institutional authority of (9) Surabaya City Electronic Procurement Service/ ULP and LPSE LPSE (2012).Bidding data (Data file) retrieved from http://lpse. surabaya.go.id/eproc/app. References Accessed on October 7th, 2012 (1) City of Surabaya (2012), Equipment Unit Report (10) United Nation. (2012). E-Government Survey Surabaya City. Unpublished Reports 2012. New York, United Nation (2) Hui, W. S., Othman, R., Omar, N. H., Rahman, R. A., & Haron, N. H. (2011). Procurement issues in

19